Kicking the Can

The fiduciary rule is here and in effect … for now. On the morning of May 24, as I started to make sense of my email, I noticed one from the DOL and saw a news alert about the fiduciary rule. Turns out Secretary of Labor R. Alexander Acosta had written an op-ed about the status of the rule, and at the same time the DOL had released a set of FAQ [frequently asked questions] and a field assistance bulletin about it.

Based on the headlines I had just seen, I knew the rule would go into effect on June 9—its delayed date—but I didn’t know the logic behind the DOL taking no action to delay it further. After all, the rule has been disparaged multiple times by folks associated with the administration, so I had expected to see some delay attempt. I was curious about what drove the decision to let it stand.

Therefore, I read the op-ed with interest (who in our industry didn’t?), and I was struck by the tone of the piece. Secretary Acosta didn’t write that those in the DOL

had considered the reams of comments that had come in, over the course of many, many years. Nor did he weigh the pros and cons of the rule from the perspective of the administration.

In fact, it was clear that the administration was not particularly in favor of the rule, with Acosta’s comments including: “This administration presumes that Americans can be trusted to decide for themselves what is best for them,” and “Americans should be trusted to exercise individual choice and freedom of contract.”

However, Acosta said, “We have carefully considered the record in this case and have found no principled legal basis to change the June 9 date while we seek public input. Respect for the rule of law leads us to the conclusion that this date cannot be postponed.” The fiduciary rule is, as Acosta writes, “the rule of law,” and therefore it is in effect at least until the administration figures out a plan to rewrite it.

All of those in the industry who were banking on the rule being undone were left with little time to get their house in order. Responses from industry groups have generally voiced frustration that, after so many in the administration and Congress indicated that stopping the rule was a priority, somehow at least parts of it would go into effect. But the many Americans who wrote in to the department in favor of disclosure and unbiased advice are unlikely to share the frustration.

There is still time for them to change the parts of the rule still pending until January 2018, so we can anticipate some revisions to the prohibited transaction exemptions not yet in effect—although some changes to current prohibited transaction exemptions are part of the June 9 effective date. And, yes, already some sections of the rule were stripped out when the administration delayed the enactment in April, most notably the need to declare fiduciary status to clients or to disclose specific conflicts of interest.